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administration
From minnows to mammoths, BVI’s
Whether your <strong>fund</strong> is a tadpole or a bullfrog – the
BVI’s administrators make sure they know their
customer and can bring them a plethora of services
on a plate. As you set up, though, they tell Phyllis
Feinberg, don’t expect a lack of due diligence or
any lack of regulatory oversight...
Whether it’s a small <strong>hedge</strong> <strong>fund</strong>
or a large one, the administrative
needs of <strong>hedge</strong> <strong>fund</strong>s domiciled
in the British Virgin Islands don’t
really differ that much, according
to Peter O’Connell, managing
director at administrator, Conifer
Fund Services.
“I’m not sure needs do differ
when investment managers are
looking for service — regardless of
the <strong>fund</strong>’s size,” he says. “<strong>The</strong>y’re
all looking for net asset value
(NAV) customisation (and) smaller
clients want the same customisation
as the large ones,” he says.
ON-TIME DELIVERY
O’Connell adds that <strong>hedge</strong> <strong>fund</strong>
managers want “a timely NAV, an
independent administrator, assurances
of quality service from their
administrator, such as limited staff
turnover, and the depth of contact
with a client.”
Conifer uses a “team approach”
with its clients and three people
from the firm have links to the individual
clients for business continuity
purposes.
Simon Schilder, partner in charge
of the corporate and <strong>fund</strong>s practice
at Ogier in the BVI, says, “small
<strong>fund</strong>s can have complex investments
— and sometimes some
small <strong>fund</strong>s try to do more with the
money they’ve got — so it doesn’t
mean working with a small <strong>fund</strong>
is an easier job.” He says the firm
works with both small managers
and larger ones.
“<strong>The</strong> legal fees you earn to set
up <strong>fund</strong>s are the same, whether the
<strong>fund</strong> has a seed capital of $10m or
$1bn,” he says.
O’Connell says that Conifer bases
its fees on “a mixture of size and
complexity of the <strong>fund</strong>.” In general,
as <strong>fund</strong>s grow the percentage
fee decreases, but the amount of
work it will take to serve a client
also comes into play.
“If it trades US securities it’s
cheaper; if they trade unlisted over
the counter derivatives it will be a
higher price,” O’Connell notes.
“It all boils down to price,” says
Clayton Burton, managing director,
Fortis Prime Fund Solutions in the
BVI. He explains that the cost of
administration is determined by a
variety factors, but for <strong>hedge</strong> <strong>fund</strong>
<strong>fund</strong>s. While its BVI office, together
with the legal team, prepare all necessary
legal documents and handle
the registration and set-up of <strong>hedge</strong>
<strong>fund</strong>s, once the <strong>fund</strong> is set up, the
actual administration is handled by
the firm’s office in the Netherlands.
“Circle has been using outside
trust companies in BVI to handle
setting up <strong>fund</strong>s,” says Cova.
“Now we have our own trust
company in British Virgin Islands
and provide the administration
from the Netherlands.”
WHEN THE LOVE FADES…
“Investment managers need to keep
close to their administrators,” says
Mark Chapman, partner at Deloitte.
He explains that <strong>fund</strong>s ranging in
“<strong>The</strong> strategy for us is different with each client.
We don’t look at a client as mid-, small- or large
size – each client gets a tailored solution. We meet
the clients, find out what their needs are and go
from there.”
Monique Cova, Circle Partners
Peter O’Connell,
Conifer Fund
Services
managers, the final price is the most
important thing.
TAILOR-MADE TO SUIT
“<strong>The</strong> strategy for us is different
with each client,” says Monique
Cova, head of Circle Partners’ office
in BVI. “Each client has different
needs and our solutions are tailormade.
We don’t look at a client as
mid-, small- or large size — each
client gets a tailored solution. We
meet the clients, find out what their
needs are and go from there.”
She also says that the complexity,
not just the size is an important
factor in the fees charged to clients.
“We have a questionnaire that
the client fills out. It depends on
their investment approach, trading
and reporting frequency – it can
be a small <strong>fund</strong> set up in a way
that’s costly to administer — if
they want weekly net asset values,
for example. But it can be the other
way round if a different set-up and
administration structure is chosen.”
Circle Partners’ Cova says, “I
wouldn’t say that small <strong>fund</strong>s
always pay a larger percentage (of
their assets) in fees than mid-size
<strong>fund</strong>s. We talk to the clients and
work with them to give them what
they want.” Circle has what it says
is a unique method of handling its
size from $50m to $100m have to
look after their relationships with
their administrators, “because an
administrator can suddenly say, ‘you
don’t fit our model.’
“Some of our <strong>fund</strong>s that had larger
administrators are being moved to
smaller administrators. You can’t
take your eye off the ball — be close
to your administrator,” he adds.
Chapman says, one <strong>fund</strong> he
works with had been with an
administrator for 10 years when the
administrator suddenly told them it
didn’t want it as a client anymore.
Fortis’ Clayton Burton acknowledges
Fortis “concentrates on larger
<strong>fund</strong>s,” although, “we will deal
with start-ups of $10m to $25m
depending on who the manager is
and his track record.”
Burton says the firm’s natural
client base is <strong>fund</strong>s ranging in size
from $100m to $500m and that
Fortis is now in several searches
for <strong>fund</strong>s with more than $1bn
in assets. “Funds with less than
$100m make up about 15% of our
business; the rest of our <strong>fund</strong>s are
over $100m,” Burton says.
“We work with <strong>fund</strong>s generally
ranging in size from $10m to
$50m,” says Kay Reddy, managing
director, Blenheim Fund Services.
“Large-name clients want to deal
with a large firm. Middle-tier clients
deal with mid-tier firms.”
FACE-TO-FACE CONTACT
Blenheim Trust recommends that
people setting up <strong>hedge</strong> <strong>fund</strong>s
visit the British Virgin Islands to
meet with administrators, bankers,
lawyers and other professional
resources. Reddy says it’s important
for a start-up <strong>fund</strong> “to know
you’ve been around for a while and
will be around for a while.”
Blenheim is “more of a boutique
operation,” says Reddy.
“We don’t pigeon-hole clients in
certain boxes. Each <strong>fund</strong> is slightly
unique. We hold preliminary meetings
with clients to ascertain their
needs and we can react quickly to
develop new strategies for a manager
who wants to launch a new
product,” she says.
<strong>The</strong> average administration fee
for small <strong>fund</strong>s is 20bps, which
goes down to 10bps–15bps for
larger <strong>fund</strong>s, according to Reddy.
“Our largest <strong>hedge</strong> <strong>fund</strong> is around
$500m to $600m. But, if we take out
our top 15 <strong>fund</strong>s, the average size
of the <strong>fund</strong>s we administer is small,
$30m to $40m,” says Daniel Cann,
marketing director of Folio Administrators,
which administers 103
<strong>fund</strong>s with $5bn in assets.
He says his firm focuses on providing
a value-added service to
“building a strong relationship with
our client during the set-up and incubation.
<strong>The</strong>n when they grow, they
stay with us,” he says.
Folio provides a full range of
services to <strong>hedge</strong> <strong>fund</strong>s so potentially
“all they have to do is trade
the accounts and we do the rest.”
Folio “was set up specifically to
provide high value services to niche
<strong>fund</strong>s,” says Calum McKenzie, a
director of Folio Administrators.
“<strong>The</strong> person administering the
<strong>fund</strong> has a close relationship with
it from day one. And we have client
liaison managers that deal with the
<strong>fund</strong>s all the time.”
“We provide a full range of client
services under one roof,” says Mara
Alido of ATU Fund Administrators.
“In addition to <strong>fund</strong> administration
we can also provide
banking, custody and corporate
trust services. We focus on giving
specialised services; we have topquality
systems and resources.”
According to Alido, “each administrator
has a different approach.
“For us, we’re not the most expensive
or least expensive, we focus on
offering quality,” she says.
S10 | british virgin islands supplement <strong>hedge</strong> <strong>fund</strong>s review | October 2007 www.<strong>hedge</strong><strong>fund</strong>sreview.com